Do you want to protect and preserve for yourself and your loved ones the substantial estate you have worked so hard to build? At Panitz & Kossoff, LLP, our attorneys provide estate planning and probate representation to clients throughout Southern California, including Thousand Oaks, Malibu and Westlake Village.

The simple answer is that it’s worth what someone else is willing to pay for it.

However, there are many factors that need to be considered when valuing a business. They include the age of the business, revenue, income, stability of revenue and income, growth rate, industry, management, systems and procedures, key employees, employee turnover, the economy and more.

There are also multiple methods used to value it, such as Book Value, Comparative Business Sales, Multiple of Discretionary Earnings, Discounted Cash Flow and Asset Valuation.

In many instances, the business is the single biggest asset owned by the owner. It may represent the majority of his or her net worth. If so, the owner should consider how he or she will monetize the value of the business, when it comes time to retire. They also need to protect the business against risks that could close it.

If the business is the owner’s biggest asset, how is she going to be able to retire comfortably?

There should be a succession plan in place to clarify whether the business is to be sold to an outside third party, to company employees or to the owner’s children. The owner will also have to possess enough other non-business assets, if it’s to be left to his or her children

In a family business, there could be one child who worked in the business, while the other children didn’t. How will this be handled in estate planning?

Selling a privately held business is a complex undertaking with many moving parts. An experienced estate planning attorney, working in concert with a CPA who has credentials in valuation and forensics, will be able provide you with a clear picture of the value of the business, align the sale of the business with your family dynamics and create a plan for the future that addresses retirement planning, succession planning and estate planning.

03/29/2018

As Investopedia’s article, “Social Security Claiming Options for Singles,” explains, unmarried retirees need to be certain they understand exactly how Social Security defines “single.” It’s not limited to never-married beneficiaries, because those who divorced prior to their tenth anniversary are also considered single. If you are single due to the death of your spouse, you’re eligible for widow/widower benefits based on your spouse’s work record, provided the marriage lasted at least nine months prior to your spouse’s death.

Since single retirees have no spousal work records from which to claim benefits, they must increase their own benefits. They can do this in one of two ways: maximizing earnings before retirement or waiting for benefits as long as possible to get delayed retirement credits. Delayed retirement credits offer you an increase of about 8% a year between your full retirement age and age 70.

In addition to a larger monthly benefit for single retirees who wait to file for Social Security, there’s also the possibility of taking retroactive benefits if you need cash. You can get retroactive benefits if you wait at least six months after reaching full retirement age to claim benefits. When you apply, you’ll get a maximum of six months’ worth of missed benefits as a lump sum. You will also begin receiving your monthly benefit from that point forward.

If you wait more than six months past full retirement age to claim retroactive benefits—though applying for retroactive benefits will cause beneficiaries to lose the delayed retirement credits they’ve accrued during those six months—they’ll also get to keep any delayed retirement credits accrued prior to the six-month time frame.

The positive of being single in retirement is there are fewer obstacles and more opportunities for truly golden years than married couples have. Nevertheless, you need to plan ahead for the potential financial pitfalls, especially when it comes to deciding when and how to claim your Social Security benefits.

03/28/2018

Your will may be updated, but if you haven’t looked at your beneficiary designations on documents like life insurance policies, IRAs or investment accounts, your estate plan may have a big vulnerability that needs to be buttoned up.

We all have opened multiple bank, investment, and retirement accounts that require us to name beneficiaries directly for each account. It is important to remember how important this is, because these direct beneficiary designations supersede a will. They should be reviewed carefully and aligned with your estate plan. While California law impacts beneficiary designations after a divorce, state law does not apply to retirement or other plans governed by federal law, under which the beneficiary designation controls regardless of state law.

How your accounts are titled will determine whether they’ll go through probate at your death. However, proper account titling lets you avoid probate and transfer assets directly to your named beneficiaries, since these assets pass outside of your will.

If you fail to name a beneficiary, your assets will go through probate. However, with a retirement plan or life insurance company holding your assets, there may be a contract term that designates a “default” beneficiary which may not be what you’d want. In addition, there could be some avoidable tax liabilities.

If you name your estate as the beneficiary for your retirement plan, the distributions go through probate and are more limiting than if you had named a spouse or non-spousal beneficiary. Either a lump sum makes the entire retirement amount taxable at that time or within five years of the decedent’s date of death and taxable at the time of distribution.

However, a spousal beneficiary can roll over retirement proceeds directly into her own IRA and take required minimum distributions (RMDs) based on her age, rather than the decedent’s. A non-spousal beneficiary can establish an inherited IRA and withdraw an annual amount based on his life expectancy.

An experienced estate planning attorney and/or financial will be able to review your investments, accounts and life insurance policies to make sure that they are titled properly, your beneficiary designations are up-to-date and that they are all aligned with other estate and legal documents.

03/27/2018

If you are self-employed or own a business where your only employee is yourself or a spouse, you can use “solo 401(k) and fund it with about 20% of your net profits when business is going great. Nice touch: you can also skip making any contributions when profits are sparse.

You can select from several retirement plans that let you make pretax contributions that grow tax-deferred, until you withdraw the money. If you choose to make after-tax Roth contributions to your solo 401(k), withdrawals in retirement will be tax-free.

There are also some self-employed plans that let you contribute above the limits for a traditional or a Roth IRA. With a solo 401(k), for example, you can put in money both as employee and as employer.

Therefore, you could potentially contribute as much as $55,000 of your self-employment income. Some of the common plans for the self-employed are the solo 401(k), the SEP (simplified employee pension) IRA, and a SIMPLE (Savings Incentive Match Plan for Employees) IRA.

The new tax law will have an impact on retirement plans. It may affect how you may save for retirement. For example, sole proprietors, partnerships, and other pass-through entities can now deduct 20% of their profits from their taxable income. However, the 20% pass-through deduction will be applied to the lesser of your qualified business income or taxable income minus any capital gains.

Whatever plan you and your accountant decide is best for you, bear in mind that you want to find the solution that allows you to max out retirement savings, while minimizing your tax bill. Take into consideration how much you earn and how much you can afford to save while maintaining your lifestyle, and what kind of retirement you’d like to enjoy.

03/26/2018

Best practices and a partnership with law enforcement, including prosecutors, is part of a new program launched in San Diego County to address the rising number of elder law and dependent adult abuse incidents.

To address an increase in crimes against seniors, as well as the impending explosion of the elder population, District Attorney Summer Stephan met with professionals who deal with the elderly and dependent adults to identify gaps and needs in the community and to set goals for the future.

Stephan said, "With this countywide initiative, we're proactively responding to an increase in elder abuse crime as this population continues to grow. This first-of-its-kind combating elder abuse blueprint will provide a coordinated regional response leveraging resources and partnerships to protect seniors and keep them safe in our community."

In San Diego County, about 23% of the population will be over age 65 by 2050—a 10% increase from 2015. The increase in the older population means that elder abuse is also on the rise.

In 2016, there were 780 violent crimes against senior citizens, an increase of 13% from the previous year and 37% from five years ago. Those 780 crimes included 14 homicides, 24 rapes, 205 robberies, and 537 aggravated assaults.

"What makes elder abuse so heartbreaking, and so difficult for outsiders to recognize, is that it often comes at the hands of caretakers or family members who have the victim's trust," said San Diego City Attorney Mara Elliott.

Without the full involvement of the authorities and the community, she added, it’s difficult to protect the elderly from fraud, neglect and abuse. It’s critical for the community to be aware of these crimes and available resources, and regional cooperation and mobilization must be part of the solution.

03/23/2018

In some respects, this blog post is very legalistic. However, it emphasizes the need for drafting attorneys -- and their clients -- to make sure that a person's wishes are clearly spelled out in each estate planning document, and that each estate planning document complements, rather than contradicts or calls into question, the provisions of other estate planning documents.

The two surviving children of Constantine W. Pournaras, Elaine Jaffe (Jaffe) and William C. Pournaras (William)—are battling over a Superior Court judgment that gives Jaffe declaratory relief and prohibits William from transferring assets of their father’s irremovable living trust into his estate. The case made its way to the Supreme Court of Rhode Island.

Findlaw recently published the case of “Jaffe v. Pournaras.” In this case, Constantine, who passed away in 2012, executed signed documents during his lifetime that are at issue: a revocable living trust (the living trust), an irrevocable living trust (the irrevocable trust), and a last will and testament.

The living trust named Constantine as trustor and sole trustee with William as the sole successor trustee. According to Jaffe, the living trust was "funded with approximately $500,000." The living trust provides that, upon Constantine's death, the trustee (William) "shall pay the property located at 43 Knollwood Avenue, Cranston * * * to * * * POURNARAS [William]* * *"; the living trust also provides that, if the trust owned liquid resources, the trustee shall pay $50,000 from those liquid resources to Jaffe, not including the aforementioned real property.

The irrevocable trust names William as trustee. Jaffe says that William advised her that the irrevocable trust contained assets worth approximately $694,000. The irrevocable trust reserved to Constantine the power "to appoint any part or all of the [t]rust [e]state to or for the benefit of any of [his] descendants, in equal or unequal amounts, either directly or in [t]rust, as [he] may direct." It also specified that this power of appointment is "exercisable by written instrument during [his] lifetime or by [w]ill or any [c]odicil thereto[.]" The power of appointment, however, is limited and cannot "be exercised in favor of [Constantine's] estate, the creditors of [his] estate or in any way that would result in any economic benefit to [him]." The trust also directs William, as trustee, to divide the trust assets into "separate and equal shares" between Jaffe and William, as his surviving children, upon Constantine's death.

The will names William as personal representative and provides that he "shall distribute [Constantine's] residuary estate to the then acting [t]rustee" of the living trust (William). Section 5.01 of the will defines "residuary estate" as, in relevant part, "any property over which [Constantine] may have a power of appointment * * * less all valid claims asserted against [his] estate * * *."

In 2014, the will was admitted to probate, and Jaffe filed a complaint seeking declaratory and injunctive relief to prevent William from transferring the assets of the irrevocable trust into Constantine's estate, and to have William removed as trustee. She alleged that he intended to transfer assets from the irrevocable trust to Constantine's estate by exercising the limited power of appointment in the irrevocable trust. However, William argued that the will was intended to be an exercise of the limited power of appointment contained within the irrevocable trust.

Chief Justice Paul A. Suttell said in his opinion that the court's primary objective when construing language in a will or trust is to ascertain and effectuate the intent of the testator or settlor, if that intent is not contrary to law. Plain language of the will or trust is considered first, and the court won’t resort to considering extrinsic evidence, where the intent is clear "from within the four corners of the will[.]"

Jaffe argued that the plain language of the irrevocable trust was clear and expresses Constantine's intention to prohibit the limited power of appointment from being exercised in favor of Constantine's estate or creditors of his estate. She argued that Constantine could have but did not exercise his limited power of appointment by his will to appoint the property to a third party, such as directly to his living trust or to [William]. She said the language in the will didn’t constitute a valid exercise of the power of appointment, because it would contravene the plain language of the irrevocable trust, which expressly prohibits the exercise of the power of appointment for the benefit of Constantine's estate. The Supreme Court agreed.

The Chief Justice found that if the exercise of the power of appointment were deemed valid, the very terms of the will would place the assets of the irrevocable trust in his residuary estate, subjecting them to the demands of creditors. That would be contrary to Constantine's intent, as expressed in the irrevocable trust.

In this case, the Supreme Court ruled that the language of Constantine’s irrevocable trust was clear. Therefore, there was no need to examine his intent by using extrinsic evidence. He wished to make sure that the power of appointment was used to benefit his descendants. The Supreme Court ruled that the decision of the Superior Court was correct and upheld its decision.

03/22/2018

It’s one thing for parents to expect kids to do chores. It’s another to expect that they will take parents into their homes and provide round-the-clock care when you have your own family and responsibilities. According to MarketWatch’s article, “Not expecting to be a caregiver? You’d better check that with your parents,” disaster for all can result when a parent’s idea of home care centers on their adult children’s homes.

In many instances, parents have no one to help them in the house or bring them to appointments. Those adult children who do help their parents may save less for their futures as they help pay for their parents’ care and, in some cases, may cut back on work hours or leave a job altogether. Even worse, these discussions may not take place until it’s too late.

According to a survey by Bay Alarm Medical, some 55% of parents say that their children will be the ones caring for them, physically or financially, as they age. However, not all children agreed with that or knew about it. Parents are more likely to lean on their daughters (and expect that of them) than their sons—about three and a half times more so, according to a 2006 study on mothers’ expectations of caregiving by their children. That’s because they usually rely on the children they believe are closest emotionally.

However, like many money and final year-type topics, families don’t talk about this because they’re uncomfortable or private. Parents will keep their finances hidden and sometimes forget or avoid (or just don’t know how!) telling their children what they expect in their old age. This could mean a disappointed parent or one without the proper plan to fund their care. Children bear the brunt financially if they become their parents’ caregivers without planning. They may not pursue specific careers because they have to move back home, or they won’t put more money in retirement savings because they think they’ll need liquidity for when their parents’ health deteriorates.

Communication is critical on the topics of caregiving and estate planning. Start these discussions with the whole family together and create a list of questions or concerns.

Conversations between parents and children and, if there are siblings, between the siblings, are necessary to make a reasonable plan that will be as fair as circumstances allow. A discussion with an estate planning attorney may yield some useful insights, as they have experienced the varied arrangements of many families and can bring an unbiased and unemotional approach to the family’s situation. Also remember that I have a medical social worker as a key member of our life care planning team who can help guide you with elder care issues.

03/21/2018

A recent article in Hotel Management, “How to handle estate planning for continued business growth,” advises business owners that a good estate plan can help distribute wealth and minimize estate taxes. However, a good estate plan will also increase the changes of the business surviving when the owner has passed.

One reason is that an estate plan lets the owner maintain control of the business beyond his or her lifespan. Estate plans can also insulate owners against lawsuits and the impact of divorce. They direct the distribution of assets, communicate owners’ health-care wishes, decrease estate tax liability at the state and federal levels and help create a legacy.

A primary reason to implement estate planning in any business, is to limit estate tax exposure. Paying for or decreasing federal and state taxes are two key reasons for estate planning.

The new tax law says the federal estate tax threshold is $11.2 million per person. That means owners can pass a total of $11.2 million to their beneficiaries tax-free. Any amount over that cut-off is taxed at 40% on the federal level. Remember that, absent future political action, this exemption will revert to $5 million per person indexed for inflation after 2025.

Estates can also be taxed on the state level, which can create some complications.

Some states have estate taxes, and some have inheritance taxes. A few have both estate and inheritance taxes, like New Jersey and Maryland. Tax thresholds and percentages vary based in each state.

Establishing a will or revocable living trust is important, because these legal tools allow you to designate assets to certain heirs and helps to avoid probate judges making decisions on an owner’s behalf.

In some states, if you own an asset when you pass away, and if it’s not clearly written in a will or a revocable living trust that it goes to your intended heir (your daughter or grandson, for example), the probate judge will determine who will get the asset based on state intestacy law.

In addition, a will or revocable living trust can allow for equalization of the estate. For instance, if one child wants to continue the business, but another wants to do something else, then their parents can make sure they are both treated equally in the will or revocable living trust.

Reviewing and updating estate plans is particularly important for business owners, because assets tend to be larger and there’s more at risk. Changes in tax law and changes in your life also call for reviews to ensure that your wishes are followed, and your family is protected.

One Texas woman who was scammed by predators targeting the elderly lost everything. Her granddaughter believes the fraud drove her grandmother to suicide.

“She felt humiliated and she had lost everything. She died with 69 dollars in her bank account,” said the fraud victim’s daughter, Angela Stancick.

Attorney General Jeff Sessions recently announced a major federal crackdown.

“The rise of new technologies has made it easier for criminals to coordinate their efforts and perpetrate their crimes,” said Sessions.

More than 200 defendants have been charged in fraudulent sweepstakes, contests, and technology schemes. They’re accused of defrauding seniors out of their life savings.

“You can be a target, but you don’t have to be a victim,” said Postal Chief Inspector Guy Cottrell.

Officials stress that consumer education is the best defense from these scams. They advise seniors never to pay to receive sweepstakes winnings.

Families should watch for suspicious mail.

Families are encouraged to speak with the FBI, the Federal Trade Commission (FTC), or their state attorney general, if they have any questions or concerns.

A Senate committee on aging reports that its fraud hotline took double the number of reports in 2016 as in 2015.

As those of you I have discussed this issue with know, I have little confidence in law enforcement's ability to find and prosecute elder abusers. Tasks forces do not do deter elder abusers. Law enforcement agencies in every state have their own cases to investigate, so when a law enforcement agency in State X reports to State Y that elder abuse was committed by someone in State Y, State Y rarely, if ever, investigates since the victims are not on its soil. Moreover, the FBI investigates elder abuse, if at all, only when large sums (think more than $1,000,000) are involved, so forget getting any attention if your loved one loses a mere $100,000 or $500,000 of their life's savings.

Hopefully, the federal crackdown, steps taken by some states, and a growing awareness of elder financial abuse will at least slow down what has become an epidemic of crime against seniors.

03/16/2018

The woman, Patricia Thomas, is suing the National Collector’s Mint, alleging that one of its sales representatives used the pretense of checking in with her to convince the 72 year old, to spend $1.3 million on gold and silver coins, which were worth less than half of that. She claims the telemarketer misrepresented the risk and profitability of the investment, violating both federal telecommunications law and Texas’ deceptive trade practices law.

Some unscrupulous sales representatives will target older investors, preying on their anxiety of whether they've saved enough to retire and promising them above average earnings by investing with them.

Most of the investment fraud cases brought by the Texas State Securities Board against investment firms and advisors last year involved elderly investors. In these cases, sellers often describe the complicated investment vehicles as great opportunities to make extraordinary returns and claim that they're "risk free," "safe and secure" and "guaranteed.”

National Collector's Mint makes and sells coins and collectibles, advertising on television, magazines, its website, and through telemarketing, according to the Federal Trade Commission. The mint settled the action, without admitting any wrongdoing.

Thomas suffers from rheumatoid arthritis and requires full time care. She sees her children infrequently and anticipated the calls from Randy T. Perry, the mint's sales representative, according to court documents. She came to believe that Perry, who was also named in the suit, was a close friend whom she could trust, the lawsuit alleged. As a result, she made significant purchases, including many coins that cost more than $30,000 each.

According to court filings, Thomas had no idea that rare coins are purchased and sold in coin marketplaces, or that there are ways to access information on their real value.

She was lured in with two key elements: low cost coins to get the sales process started, and the promise of a caring friendship of a stranger.